asv108's Journal: Paid Hotspots are not a Viable Business Model

The Register has a little article about how T-mobile's paid hotspot idea is not doing so hot. I'm sure for a few well traveled customers, paying $8/hr for WIFI is a great deal, but for normal people it is simple excessive. The problem with the whole paid WIFI concept is barriers to entry.

For instance in State College, PA there are probably about 10 coffee shops, one of which is a recently sprung up Starbucks. The State College Starbucks doesn't have wireless but lets assume for this example that it does. Any other coffee house can offer free wifi access for less than $100/month, which is nothing if the have any kind of decent volume. The increased traffic alone will cover their costs.

Right now there are 3 places in State College, PA with free WIFI offered, one of the places is now where most of my work meetings take place. My boss and I alone cover the cost of the commercial cable modem account every month in increased sales. I'm guessing that the place has probably does 10x the amount of variable costs for wifi in increased profits for one month alone. In a period of 4 months, I've seen the place go from maybe a laptop or two at lunch, to at least 10 during peek times.

Now if the State College Starbucks had WIFI, why would anybody, except people unfamiliar with the area, pay $8/hr for something they can get for free from a local business two blocks down? Free wifi may be unusual right now, but five years from now it will be a requirement for any business that encourages people to "hang out" or for any establishment trying to attract business customers. All these paid hotspot companies are going to go down the gutter.

McDonalds' Model is Workable Compromise

[Cy Guy]

I agree that most people aren't going to routinely shell out 10-15 cents per minute for connectivity. There will be exceptions like business travellers that don't want to pay up to a $13/night surcharge for broadband in their hotel rooms just to check their email on the road, and there might be a few locals that are desperate to connect and can't find an "free" connection nearby (though given starbucks target demographic its unlikely there are many placed far enough away from the typical wifi enabled bob